Lucas Outumuro
Ethereum’s (ETH) identity is shifting as it moves from a deflationary model to inflation, raising doubts about its role as a cryptocurrency amid the rise of layer 2 solutions and Bitcoin’s (BTC) dominance.
In an X article on Oct. 4, IntoTheBlock’s head of research Lucas Outumuro noted that although on-chain fees have seen a slight rebound in September, Ethereum continues to grapple with substantial fee reductions that have hindered its performance.
The Dencun upgrade, which introduced EIP-4844, has had a major impact on Ethereum’s economics. Though it spurred layer 2 transaction volumes, mainnet fees hit all-time lows, raising concerns about Ethereum’s deflationary narrative. Fewer fees mean less ETH is burnt, leading it to become “inflationary again after the Ethereum community consistently focused on its deflationary path before that,” Outumuro pointed out.
Q3 revealed a challenging landscape for the crypto market, marked by low on-chain fees, rising Bitcoin dominance, and Ethereum’s struggle with inflation and underperformance.
Q3 revealed a challenging landscape for the crypto market, marked by low on-chain fees, rising Bitcoin dominance, and Ethereum’s struggle with inflation and underperformance.
Other than that, the ETH/BTC ratio has fallen nearly 30% since the Dencun upgrade, signaling an “identity crisis” for Ethereum, according to Outumuro. As of press time, Ethereum is trading at ,390, more than 50% below its all-time high from three years ago.
Meanwhile, Bitcoin’s market share climbed to its highest level since April 2021, even as its price remained mostly stable throughout the quarter, Outumuro says, adding that Ethereum and altcoins keep reaching new yearly lows. In the meantime, Bitcoin’s fees plummeted by 86% over the quarter, reflecting a market that appears unfazed by this decline.
